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Posted in Copyright Nils RauerAlastair ShawPenny Thornton

A second market for “used” e-books – CJEU will decide

Ever since the European Court of Justice (CJEU) in its highly regarded UsedSoft ruling declared the resale of “used” software admissible (dated 3 July 2012, C-128/11), the discussion has persistently centered around the question whether the idea of the so-called exhaustion, upon which UsedSoft is essentially based, could or should be extended to other digital content – such as e-books. The principle of exhaustion states that the resale of works or copies thereof within the European Economic Area (EEA) is permitted without the consent of the rights holder, provided that the work or a copy was first placed on the market within the EEA with the consent of the rights holder. However, in copyright law, this principle is basically linked to the distribution of physical objects and not to the downloading of data packages. As a result, the physical book has been treated differently from its electronic counterpart until today. The CJEU must now clarify in a current preliminary proceeding whether this will continue to be the case in the future (C-263/18Tom Kabinet).

Background

The average reader will not be aware of the legal differences between purchasing a physical book and downloading an e-book. However, a physical book and an e-book are treated differently under EU copyright law. The reason for the unequal legal treatment lies in one of the fundamental principles of European copyright law, the principle of exhaustion regulated in Article 4(2) of the InfoSoc Directive 2001/29. According to the principle, the rights to a work or its copies “exhaust” as soon as the first distribution in the EEA has taken place by the right holder or with his consent. The principle of exhaustion ties is linked to right of distribution as laid down in Article 4(1) of the InfoSoc Directive. This right is primarily concerned with the distribution of physical works and not with making digital content publicly available via the Internet.

In recent years, various courts have already dealt with the subject matter and – consequently in light of the existing legal situation – have denied the applicability of the principle of exhaustion to e-books (see our German blog post). Only in case of computer programs have, the courts have taken adifferent approach. This is because they are subject to the special provision of Article 4(2) of the Software Directive (which does not apply to other copyright works).

In a recent case, the Dutch bank in The Hague must now decide whether the online marketplace Tom Kabinet, which specializes in the resale of used e-books, is liable for copyright infringement by authors and publishers. Once again, the principle of exhaustion is at the center of the dispute. The Court recently suspended the proceedings and referred a number of questions to the CJEU.

The questions submitted

The Hague Rechtbank has decided to submit four questions to the CJEU (not yet available on the website of CJEU):

  1. First, the Dutch Court wants to clarify whether the right of distribution under Article 4(1) of the InfoSoc Directive also includes the provision of e-books as a download and for a temporarily unlimited use, provided this is done at a price at which the author receives remuneration equivalent to the economic value of the work belonging to him.
  2. Should the CJEU answer in the affirmative to the first question, the Dutch court asks whether Article 4(2) of the InfoSoc Directive, the principle of exhaustion, includes the first provision in the form of downloads of e-books – provided again that the author in return receives remuneration corresponding to the economic value of the work.
  3. By the third question, the Dutch Court seeks clarification that another right of exploitation may be concerned in the resale of digital works/copies between the original and the subsequent purchaser: the right of reproduction. The CJEU will therefore have to answer the question whether Article 2 of the InfoSoc Directive must be interpreted as meaning that the resale of the exhausted used e-book constitutes consent to all acts of reproduction required for the lawful use of the copy. If so, what conditions apply?
  4. Finally, the CJEU should state whether Article 5 of the InfoSoc Directive can be interpreted as meaning that right holders can no longer object to the acts of reproduction required for resale between successive purchasers of the legally acquired and “exhausted” copy and, if so, which conditions apply. The CJEU’s ruling will determine whether or not the difference between physical books and e-books will remain. But the importance of the proceedings goes far beyond that. Whether the digital content that the user downloads from the Internet on the second-hand market is an e-book or something else is ultimately hardly relevant. It is about digital information as such. It is obvious that there is a demand, a market for “used” content. This applies to texts as well as to music, videos and other audio-visual media. The “normal” purchase process is already digital today – and not the walk into the shop. This alone shows how relevant the questions are that the Luxembourg judges now have to deal with.

Comment

Incidentally, this is not the first time that e-books have occupied the CJEU. On 10 November 2016, the European Court of Justice ruled on the rental of e-books (C-174/15). The court stated that the rules for the lending of e-books are the same as for the lending of physical copies – provided the lending conditions are comparable to those of physical books (see our blog post).